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MILLER v. TAYLOR INSULATION CO.

April 14, 1992

JOSEPH C. MILLER AND KAREN M. MILLER, PLAINTIFFS,
v.
TAYLOR INSULATION CO. AND JON NELSON, DEFENDANTS.



The opinion of the court was delivered by: McDADE, District Judge.

ORDER

Before the Court are Cross-Motions for Summary Judgment by the parties (# 42-1 and # 46-1) and Defendant's Motion Requesting Court to Take Judicial Notice (# 52). For the reasons that follow, the Court grants Defendant's Motion for Summary Judgment (# 46-1) and denies Plaintiff's Motion for Summary Judgment (# 42-1). Defendant's Request for Judicial Notice (# 52) is moot.

JURISDICTION

This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. The Millers are residents of the State of Arizona and Taylor is a corporation having its principal place of business in Rock Island, Illinois.

BACKGROUND

In Count I of the Plaintiff's Amended Complaint, the Plaintiffs (Millers) assert that the Defendants, Taylor Insulation Company and its president, Jon Nelson (hereinafter Taylor), breached a contract between the parties by denying benefits to the Millers under Taylor's medical reimbursement plan. In Count II, the Millers seek punitive damages and damages for emotional distress for willful and wanton denial of the Millers request for payment of medical claims.

The Miller's original complaint alleged violations of ERISA and breach of contract. On May 24, 1991, this Court entered an Order dismissing Miller's ERISA claim.*fn1 Because Miller's breach of contract claim was pendent to his ERISA claim, this Court dismissed the breach of contract claim also.

Miller then filed an amended complaint under diversity of citizenship jurisdiction. 28 U.S.C. § 1332. On October 11, 1991, Miller filed a Motion for Summary Judgment. Taylor filed its Motion for Summary Judgment on November 20, 1991.

STATEMENT OF FACTS

Miller began employment with Taylor in 1963. In 1973, Miller became president and in 1979, was chairman of the board. Defendant Jon Nelson was elected to succeed Miller as President upon Miller's retirement. On November 8, 1979, Miller retired and the parties executed a document titled Taylor Insulation Company Consultation and Non-Competition Agreement (Agreement). The Agreement entitled Miller to participate in Taylor's sick-pay plan, the medical reimbursement plan and the group life insurance plan which were currently effective. The term of the Agreement was ten years, commencing December 1, 1979.

Miller alleges breach of contract by Taylor in denying reimbursement for Miller's medical claims and not paying the claims as provided in the Agreement. The controversy before the Court concerns Taylor's medical reimbursement plan. Miller contends that paragraph 3(b) of the Agreement provided benefits to Miller and his dependents. Taylor disputes that the Agreement provided the "benefits" of the medical reimbursement plan. It claims Miller was only "entitled to participate" in a group health plan, and that actual coverage, and the right to benefits, was determined by the group health carrier.

At the time the Agreement was entered into, Taylor's medical reimbursement plan included a combination of benefits, some provided directly by Taylor, and the remainder through a group health insurance policy issued by Great West Insurance Company. The parties do not dispute that the group health insurance policies were a major component of Taylor's medical reimbursement plan in effect at the time the Agreement was made. In 1980, Taylor changed its insurance carrier to United of Omaha. The United of Omaha policy remained in effect until January of 1987. On January 28, 1987, Taylor obtained new group health insurance from New York Life.

Between 1979 and 1986, Miller made claims for medical care for himself and his dependents and benefits were provided. When Taylor changed its health insurance carrier from United of Omaha to New York Life on January 28, 1987, Miller's name was not submitted for coverage under the New York Life policy. As of that date, Miller was no longer a participant in Taylor's medical reimbursement plan. Miller, however, was not aware that he had been dropped from the plan.

In June of 1987, Miller submitted medical bills to Taylor for payment. On July 7, 1987, Taylor notified Miller that it was denying the claims because Miller was not included ...


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